New rule would increase minimum wage for federal contractors
The U.S. Department of Labor is proposing a rule that would increase the minimum wage for federal contractor employees to $15 per hour beginning on Jan. 30, 2022. Starting Jan. 1, 2023 the minimum wage for federal contractors would be adjusted each year to reflect the cost of inflation.
President Joe Biden issued an executive order in April requiring federal contractors to increase the minimum wage for their employees. This DOL-proposed rule was issued to implement that executive order, which applies to new federal contracts, solicitations and contract renewals entered into or exercised on or after Jan. 30, 2022. The order does not apply to grants or to agreements with American Indian tribes.
The proposal would also increase wages for tipped employees working for federal contractors. Under federal law, tipped employees can receive a cash wage lower than the minimum wage rate. For tipped employees working for a federal contractor, the cash wage will increase to $10.50 an hour on Jan. 30, 2022. Beginning Jan. 1, 2023, the cash wage for tipped employees will be 85% of the federal contractor minimum wage.
Employers must ensure tipped employees receive compensation at least equal to the minimum wage rate. This may require increasing a tipped employee’s cash wage so that the employee’s combined cash wages and tips are at least equal to the minimum wage rate.